Odd that Google isn't talking about its banner ad business: Google launched graphical ads in May 2004, but has said almost nothing about that business.

Quick comments:

Search is the fastest growing and most profitable part of Yahoo!'s business. Other areas, such as subscription services, have far lower margins and are growing slowly, as can be seen from Yahoo!'s recent financial results. If search was a slowing and unexciting business, Terry Semel wouldn't be racing to add search features to almost every Yahoo! page.

The traditional banner-ad business, far from being an exciting growth area, is broken. Evidence? DoubleClick's recent results and disappointing guidance.

Google's graphical ad business is not comparable to Yahoo!'s traditional banner ad business, because the Google graphical ads are placed on content pages (not search pages) using the same contextual positioning technology as its text ads. In fact, it's hard to break out the performance of Google's graphical ad business because its graphical ads are served interchangably with text ads. A better distinction would be between contextual ads and traditional banner ads.

Google a "one-trick pony"? Hardly. Google is moving aggressively to compete with Yahoo's most successful and "sticky" services, including Gmail, Google Groups, and Google Maps. And the implications of Google movies are also significant: as search engines become "answer engines", search and content converge.

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